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By Gareth Horsfall
This article is published on: 27th May 2026
My son turned 16 this year, and I guess it’s normal, especially in today’s world of instant gratification and media, that young adults would be curious about global political events.
It is therefore no surprise that he has been asking about the Iran/US war, how it started, and what the reason behind it is. Clearly, it is not easy to give a simple and quick answer to these sorts of questions, but often I simply answer, “follow the money.” If you follow the money trail, it will very likely lead to the main real reason why.
In the 2022 Ukraine/Russia conflict, we can see that the territory which has now been claimed by Russia in the eastern part of Ukraine, apart from being ethnically Russian, is also the most resource-rich part of Ukraine, holding the majority of Ukraine’s $15 trillion mineral wealth. The region accounts for roughly 80% of conventional oil, gas, and coal reserves, as well as critical minerals essential for defence and green technologies. The Dnieper-Donetsk Basin and the Donbas (Donets Basin) are the most resource-important parts of the country.
The east contains the overwhelming majority of Ukraine’s coal, natural gas, and conventional oil reserves. The region is also home to major deposits of iron ore, titanium, uranium, and lithium — materials that are highly prized for their use in aerospace, electronics, and electric vehicle battery industries. It’s no wonder that the war trudges on!
It is therefore no surprise that the recent Trump visit to China ended with reports (albeit from Trump himself — no word from China yet!) that China will now be buying more oil from the USA and less from the Middle East.
Is this a sign that China is not happy with recent events in the Gulf and has decided that its economic links and export-led economy are more tied to the US consumer than they would like to admit, and therefore they want to secure energy resources from them as well? Or merely a case that they are left with no choice?
Either way, the decision makes a lot of sense given that China is the largest consumer of oil in the world, and the US is the largest producer. In fact, the USA is, by a long way, the biggest oil producer in the world, pumping 13.58 million barrels of crude a day. Its nearest competitor is Russia on 9.87 million barrels of crude per day, closely followed by Saudi Arabia on 9.51 million barrels of crude a day. The three together account for 40% of the world’s supply! (The USA also now controls the Venezuelan energy infrastructure!)
So, energy reliance on the Straits of Hormuz is likely to decline in coming years given the chokehold that Iran has on the area. 20% of the world’s oil passed through the Straits of Hormuz prior to this war, and Europe was the most susceptible to Middle Eastern oil disruption. Trump is going to open up drilling in Alaska and, as more oil is pumped out of that region, then it’s likely that China and the rest of Asia will start buying more from Alaska as it comes online.
Just like I say to my son…..follow the money!
So, does this create a potential investment opportunity? It certainly does! Mining and oil exploration are starting to look attractive once again.
Our asset manager partners are keeping a close eye on the opportunities as they arise.
I know for the green investors amongst you this is the worst possible news, but the economic “West” can only protect its future development into a world of AI, robotics, and tech with access to primary resources which are not in what is considered economic or geopolitical hotspots.
I won’t blather on about this, but just to say:
In the meantime, a typical GBP multi-asset portfolio in a balanced risk profile returned around 17% p.a. over the last year to date, 31.49% over the last 3 years to date, and around 33% over the last 5 years. Average annual return over the last 5 years: 7.7%.
A typical EUR multi-asset portfolio in a balanced risk profile returned around 15% p.a. over the last year to date, 32% over the last 3 years to date, and around 31% over the last 5 years. Average annual return over the last 5 years: 5.27%.
The McKinsey Global Institute frequently discusses how similar cycles of pessimism and economic hardship impact consecutive decades and generations, meaning that every adult generation is likely to live through the same economic periods as the one before them at least once in their life, if not more.
I turned 18 (supposedly an adult!) in 1992. Prices hardly rose in real terms from 1992 until 2020. Then Covid, then Ukraine/Russia, and now the Middle East conflict. It’s now my turn to live through an inflationary period.
In 1973, an oil embargo lasted 6 months. Crude went up 400%. It never came back to where it started from.
1979 — The Iranian Revolution — prices doubled again.
Prices may fall back a little when the conflict settles, but are unlikely to settle back to previous levels. Given my eye-wateringly high gas heating bill over the last winter, I am not looking forward to next winter! But I still have the summer to try and avoid overheating!
Investing is the only way to protect your hard-earned capital. Do not sit in cash long term. Keep the things under your control under review — costs and your risk profile — and let the markets do the rest.
Inflation in Italy since 2020 sits officially at 18%, but the reality is that it is more likely 30–45% depending on location.
Between 5% and 7.5% per annum.
At a sustained 7.18% inflation rate, your money will halve in value in 10 years…
…this has the same effect as your healthcare costs, care homes, schools, trips for the kids and grandkids, flights, food, eating out, etc. doubling in value.
Making your money work harder for you is so important in periods like the one we are currently going through. Protecting your future is key.
At the moment I am working with a lot of clients to plan their UK Inheritance Tax liabilities and how to avoid them under the new UK Statutory Residence Test system.
Given the change to UK Inheritance Tax for non-UK residents, which will come into force in April 2027, it makes perfect sense for anyone who has already been away from the UK for more than 10 years, or anyone thinking of doing so, to take a good look at their financial affairs and see how they might be able to avoid UK inheritance tax, and in some cases avoid it altogether.
From next year, the rules will change from a domicile basis to a residence basis. Domicile was always a difficult link to break with the UK, regardless of where you were living in the world, and the UK always had the right to tax your worldwide estate if they deemed that you had sufficient ties to the UK at the time of your death.
Now, given the Statutory Residence Test rules, if you can show that you have been a non-UK resident for 10 out of the last 20 years, then your non-UK situs assets will not fall under UK inheritance tax law. UK situs assets will, however, still be subject to UK inheritance tax. When it comes to gifting assets to your spouse, then there are some new things to consider:
When both spouses have been outside the UK for more than 10 of the last 20 years and are considered non-UK long-term residents
You can no longer transfer an unlimited amount of UK situs assets between spouses. In this case, you can only transfer £325,000 on top of the nil-rate band, therefore a maximum of £650,000 before UK IHT at 40% is applied. If you have assets in the UK over £650,000 and qualify under the non-UK long-term resident rules, then the logical conclusion is that you look to move your assets outside the UK as soon as possible as part of your UK IHT planning exercise.
One of you is a UK long-term resident (has not yet qualified with 10 years’ continuous non-UK residency) and the other is a non-UK long-term resident
In this case, the logical conclusion is that, once again, you look to move your UK situs assets outside the UK, but by gifting them to your non-UK resident spouse. Your spouse would be subject to the same rule as above, i.e. a limit on the transferable amount at a £325,000 tax-free allowance plus a £325,000 additional non-UK long-term resident allowance, therefore £650,000 total. Anything over £650,000 would be subject to the UK’s potentially exempt transfer rules, i.e. if you live 7 years after the gift, then it is fully transferred and no longer in your estate for the purposes of inheritance tax in the UK. The obvious advantage of this approach is that your spouse is no longer subject to UK IHT and, if considered for IHT in Italy, then with some careful planning may be able to even reduce that to zero in Italy.
The alternative, depending on your own circumstances, is to keep the assets in your own name and move them outside the UK, taking the view that once your 10 years’ continuous non-UK residency has passed, then they no longer fall within your UK estate for IHT purposes.
Private pension funds
Unused private pension funds will be brought into the IHT net in the UK from April 6th, 2027. This is bad news for anyone with a sizeable pension pot in the UK. At the same time, the UK has imposed an Overseas Tax Charge on moving your pension outside the UK. In the past I have moved clients’ pension funds into a QROPS (Qualified Recognised Overseas Pension Scheme), and for European purposes those schemes were always located in Malta due to the compatible financial system there. Now, a transfer of this type for an Italian resident would incur a 25% overseas one-off tax charge.
Having stated this, given the prospect of paying a 25% overseas tax charge for moving your pension outside the UK versus 40% IHT on the fund in the UK, the former might be the better option. I am currently planning this action with some clients. This only makes sense where you have qualified as a non-UK long-term resident for IHT purposes.
A simple comparison between UK and Italian IHT
It is well known that Italy is a fiscal paradise from an inheritance tax point of view. They prefer to tax during life, but are very light on inheritance tax.
Whereas the UK will typically tax 40% on anything over £325,000 — the nil-rate allowance (plus an extra £325,000 for a spouse and a further £150,000 for primary house relief), Italy by comparison charges a mere 4% where the transfer is made between spouses and/or children, but the spouse and children each get a €1 million allowance (franchigia) before the 4% applies. In addition, the house price is based on the cadastral value (and not the market value) and so is much lower. Not only that, but if you structure assets correctly using an insurance portfolio wrapper, you can actually place any amount in the product and it does not enter into your estate for the purposes of making the estate value calculation.
For a family of 2 children and 1 spouse, you would pay just 4% on an estate over €3 million in value, plus the availability of any sum in an insurance portfolio wrapper without inheritance tax applied. Clearly, with some sensible planning, it is possible to reduce your estate dues to near zero in Italy.
Getting the right last will and testament in place
This all sounds very attractive, but what about the forced succession laws in Italy? If you are no longer subject to UK law, then how can you plan to leave your estate to your chosen beneficiaries?
Well, if you are an Italian citizen, then you probably don’t have a choice, but would be best speaking to a lawyer to determine if this is the case. But if you haven’t taken citizenship, then European law may allow you to nominate your home jurisdiction’s administrative law to distribute your assets to your chosen beneficiaries.
So, once again, with some careful planning you can probably even avoid Italian forced heirship rules. This is the realm of a good lawyer, and you would need to have a correctly worded will. Always take legal advice when considering your will planning options.
I wrote an interesting blog post on planning around the 7% pensionati tax regime in Italy. It was put into place in 2019 to challenge the Portuguese non-resident tax regime and has had limited take-up to date, but has become more interesting since April due to a change in the rules.
If you are interested in learning more about it, and more importantly the financial planning tricks, then you can read my post HERE.
By Gareth Horsfall
This article is published on: 19th May 2026
I could give song and verse about why it is a good time to sit in cash based on high valuations in equity markets or Bond prices being low, but my job is about long term financial and tax planning for people who are living in Italy. Therefore, 99% of the time the answer to the question will always be to invest and not sit in cash.
That might sound like a simple and quick reply to the question, but there is really only one instance when we would advise someone living in Italy to stay in cash for any period.
For anyone who needs cash in the short term — for a renovation of their Italian home, an Italian property purchase, or a major life event, money to support income needs or care costs etc — keeping money in cash is sensible, regardless of interest rates or market returns. Cash is stability, and stability has a value when we have expenses or liabilities, which can be quantified both monetarily and the term over which they need to be paid.
However, for all other long‑term goals — retirement income, future healthcare needs, supporting children or grandchildren — cash is a terrible solution. Over long periods, inflation erodes purchasing power far faster than cash can grow and if you are planning for life in Italy it is no different to anywhere else.
Even when interest rates appear attractive (and sometimes cash rates are better than that offered by the markets, but for very brief periods) they rarely keep pace with rising prices over a decade or more. Markets fluctuate, but over time, they have consistently outperformed cash.
The same principle applies today that we have always applied for our clients. Cash has a role, especially for short term needs.
But for long term goals, investing remains the most reliable way to preserve and grow purchasing power.
Inflation never disappears — and cash alone cannot protect you from its long term effects.
Italian life can be much cheaper, in many ways (food, access to services [beaches, countryside, cultural venues], eating out at restaurants etc) than life in other countries, but it still does not negate the need to invest for your long-term future rather than leaving your money sat in cash.
(At time of writing you can expect to get back, on average, a 2% return from your cash in EU based deposit accounts. If you lock in for any specific term, you may be able to get some higher rates but then you lose the liquidity of your funds)
By Gareth Horsfall
This article is published on: 8th May 2026
Because pension systems across Europe – and beyond – follow different tax models, understanding how Italy interprets them is essential for anyone planning their long‑term financial life here.
Across the world, private pension systems follow a handful of tax models. The three most common are known as EET, ETT and TTE. These refer to how contributions, investment growth and withdrawals are taxed. Many countries, including the UK, use the EET model, where contributions and investment growth are tax incentivised and withdrawals are taxed at standard progressive income tax rates.
Italy, however, uses the ETT model, where contributions into a personal pension ( previdenza complementare) can be eligible for a tax deduction (up to a certain limit), the fund itself is taxed but at the time of the payment of the income a lower income tax rate is applied.
(Only a few countries use the TTE model, where contributions and growth are taxed but withdrawals are exempt).
These differences matter because when someone moves to Italy with a UK pension from the the Italian tax authorities will classify it according to Italian tax law interpretation. Often, a commercialista is left with the decision of ‘using best logic and guidance from the Agenzia delle Entrate. This is where mismatches can arise: a pension designed under one model does not always fit neatly into another.
The EET model is widely used and easy to understand. It allows individuals to save efficiently during their working life and then pay income tax on withdrawals in retirement. Many people from the UK arrive in Italy with personal pensions/SIPP’s/occupational defined contribution pension schemes etc, and the question becomes how Italy should treat them for taxation purposes?
Since Italy taxes its own pension funds during the accumulation phase, it would not make sense for a foreign pension to benefit from tax‑free growth abroad and then also receive Italy’s preferential tax rate on withdrawals. That would amount to a double taxation benefit, which the Italian system is not likely to provide.
Italy’s own system provides for a 100% tax deduction for contributions to a ‘previdenza complementare’ up to a limit of €5300pa (as at 1 Jan 2026) but then taxes the fund during the accumulation phase. Italy also taxes withdrawals, although at a reduced rate for long‑term contributors of between 15 and 9% depending on the length of time contributions has been made.
Despite this, private pension participation in Italy remains low compared to the EU average. Limited tax incentives, restricted investment options and relatively high charges have made private pensions less attractive than other forms of long‑term saving. Many Italians prefer property or alternative investments, and the system has never fully encouraged widespread private pension participation.
Given the UK incentivises pension accumulation with tax breaks, then Italy is unlikely to apply its own reduced tax rate on withdrawals, as stated above.
Guidance issued by the Agenzia delle Entrate issued on SIPP’s (found here) seems to confirm the tax treatment as detailed above, indicating that pensions built under the EET model should be taxed as ordinary income when paid out to an Italian resident.
Ultimately, the interpretation rests with the professional preparing your tax return, but with the ruling on this specific case in 2024, we can be assured that treating UK personal and occupational defined contribution pension income as taxable under standard Italian progressive income tax rates is the correct tax treatment in Italy. Choosing a different approach may be possible, but it carries the risk of future reassessment by the Agenzia delle Entrate and possible back fines and penalties.
For those planning to live outside the UK permanently, transferring a UK pension into a QROPS has been an option for many years. These schemes operate under EU‑aligned rules and are designed for individuals who no longer intend to reside in the UK.
The UK has now introduced (from 2025) an overseas transfer charge of 25% on transfers to QROP’s where the pension holder resides in a different state to the place where the QROP’s is registered. Malta was used, prior to this ruling, as a way for EU residents to transfer their UK pensions away from the UK due to Malta’s status as an EU member state and it’s double taxation treaties with all other EU member states. (Italy does not have any QROP’s vehicles to which UK pensions can be transferred) However, given the 25% overseas transfer charge this is not a suitable option for most people.
Since Brexit, UK pension providers and UK asset managers should no longer manage monies for non-UK resident individuals due to a loss of licensing and regulatory authority. Therefore, you may find yourself in a position where
a) you are being refused any investment and /or pension advice
b) asked to transfer your pension to another pension provider who can work with you as an Italian resident
c) and/ or take the pension in one lump sum but NOT in income drawdown
Clearly all the options are unsatisfactory and c) itself could generate a big tax liability in Italy if you have a large lump sum, which becomes taxable in one year.
Bear in mind that the 25% tax free lump sum in the UK, would be taxable in Italy as income tax ! As a smart financial planning tip, it is always best to withdraw this sum before becoming a resident in Italy, if possible.
Therefore, the best advice is to transfer to a UK SIPP which can work with EU residents and will allow you the flexibility that a standard UK domestic SIPP would provide. You can get access to a wide range of asset managers and low cost model portfolio solutions. We work with such companies and regularly transfer pensions as a financial planning strategy to ensure you get access to the right advice in Italy based on your other incomes / assets.
By Gareth Horsfall
This article is published on: 1st May 2026
Since 2019 Italy has been running a special tax regime of only 7% tax for pensioners (anyone drawing a retirement income) if they relocate to the Southern states of Italy. (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise or Puglia – or to certain areas affected by the 2009 or 2016 earthquakes)
The regime pensionati was always limited to towns/ cities, which had less than 20000 registered residents. However, from April 7th 2026 it is extended to towns /cities with up to 30000 residents, which extends the number of possible towns/cities to which you could locate and more importantly have access to important services such as hospitals, medical services, shopping and sports facilities etc.
According to the Italian statistics agency (ISTAT), the majority of comuni in the southern states in this tax regime have less than 30000 inhabitants. IN fact, if we look at how many have more than 30000 residents, the numbers are more startling:
Sicilia (Sicily): 30–35
Campania: 30–35
Puglia (Apulia): 25–30
Sardegna (Sardinia): 8–10
Calabria: 7–8
Abruzzo: 8–10
Molise: 0 (Only Campobasso and Termoli are near or above this threshold historically, but often fall under it depending on current census updates)
Whilst this all sounds very exciting, there are conditions to the qualification.
Qualifying individuals pay a flat 7% substitute tax on all foreign-source income, in place of ordinary progressive income tax rates. You are also exempt from the property wealth tax and wealth taxes on foreign assets and are relieved of the foreign asset monitoring obligations that would otherwise apply.
Whilst this may seem a relatively straightforward and simple choice, it does make sense to do some careful planning before you apply.
For example, by using ISA’s in the UK, you can potentially realise capital gains before leaving the UK and re-set the clock on future gains. However, timing is important!
In addition, if you do not have assets in ISA’s you may be able to ‘bed and breakfast’ assets in your portfolio before becoming resident in Italy, to reduce capital gains tax liabilities.
You may also be able to make better use of accumulation style investments rather than income distributing to reduce your tax liabilities even further. Why pay even 7 % tax if you can pay zero?
(You pay 7% on capital gains and income ‘realised’ in a portfolio – not just used as income, and so an actively managed portfolio may produce realised, and hence, taxable ‘Italian income’ even if you are not using it for living expenses!!)
If you are a business owner who is looking to retire or sell your business, then you might be able to use the tax regime to reduce your potential tax liabilities.
These are just a few of the possible financial planning considerations that you may need to make.
You will need to plan to get the best benefits from your 7% tax regime tax residency before, during the transition year to Italy and your Italian tax residency itself.
By Gareth Horsfall
This article is published on: 29th April 2026
One of the questions I am asked regularly is how income from property held overseas is taxed in Italy. Many people wonder whether rental income is exempt from Italian tax because tax has already been paid abroad, and whether it is treated in the same way as rental income from Italian property.
To be absolutely clear, if you are an Italian tax resident, you must declare and pay Italian tax on the net profit from rental income on properties held overseas. The arrangement is reciprocal: if you were resident in another country and owned rental property in Italy, you would also be required to declare that income there.
Italian tax law states that the net profit, after allowable expenses, from property overseas must be declared in your annual Italian tax return. This net profit is added to your other income for the year and taxed at your applicable income tax rate. In addition to income tax, IVIE — the tax on foreign real estate — applies. IVIE is calculated as a percentage (currently 1.06% [2026]) of the property’s value (purchase value if outside the EU and cadastrale value equivalent if inside the EU) as defined by the rules of the country where the property is located. Even if tax has been paid in the country of origin, you are still required to declare the income in Italy, and annual declarations must be made regardless of foreign tax paid.
There is, however, a legitimate way to reduce your Italian tax liability. If the rental income is declared in the country of origin and all allowable expenses are deducted there, then only the resulting net profit needs to be declared in Italy. This can be advantageous because some countries allow a wider range of deductible expenses than Italy. In certain cases, it may even be advisable to file a tax return in the country of origin, even if that country no longer requires you to do so, simply to document expenses clearly and establish the net profit figure. By doing this, you provide the Italian authorities with evidence of your expense deductions, and the net profit declared in Italy may be significantly reduced, sometimes even to zero.
It is important to understand that all rental income from overseas property must be declared in Italy if you are an Italian tax resident, and what you declare is the net income after expenses rather than the gross amount. The net figure is then added to your other income and taxed at your applicable IRPEF rate. IVIE also applies to foreign property, and declaring the income and expenses in the country of origin can help reduce the taxable amount in Italy. Lower expenses result in a higher net profit and therefore higher Italian tax, while higher expenses reduce the net profit and may lower your Italian tax liability.
Depending on your goals, owning property overseas can work in different ways. If you have high expenses, the property may function well as a long‑term capital appreciation investment with little taxable income. If you have low expenses and high net income, particularly if you rely on the rental income in retirement, you may find yourself taxed at higher IRPEF rates in Italy.
By Gareth Horsfall
This article is published on: 28th April 2026
During the course of my many conversations, one particular issue comes up all too frequently, and I felt I just had to write about it.
What am I talking about? I am referring to the basic bank accounts that people use in Italy — those accounts that were probably set up when you first moved here, perhaps because the person you were buying a house from suggested opening an account at the same branch to make life easier, or because you were referred to the local bank simply because “everyone uses it”, or because someone knew someone who could open an account for you even before you were officially resident.
Unfortunately, many of us are still being charged extremely high bank fees for very little service. Some of the traditional banks remain among the most expensive, and yet they are still widely used by foreigners who opened their accounts years ago and never revisited the issue. I continue to meet people who are paying unnecessary quarterly fees, high commissions on simple transfers, and additional charges for cash withdrawals or currency conversions. In some cases, the total annual cost can be surprisingly high.
The problem is that many people assume that changing bank accounts in Italy is too much hassle, or that “they are all the same”, or that banking back home is better so they simply tolerate the situation.
But this is no longer the case. Italian banks — especially online banks — have become far more competitive, and there are now excellent options available that offer modern services at very low cost.
Personally, I use two banks: one for personal use and one for business. My personal account is with Fineco, which remains one of the most efficient and user‑friendly online banks in Italy. It is fully digital, easy to use, and offers a very good app. Customer service is responsive, and the account has no standard maintenance fees if you meet basic usage conditions. Withdrawals from cash machines across Italy are free, and domestic transfers cost nothing. For basic banking, it works extremely well.
My business account is with Banca Intesa Sanpaolo, which is part of a larger national network. I chose this because, as a business account, I occasionally need to speak with the bank director, but otherwise I operate everything online. The monthly fee is modest, and transfers are inexpensive. It is more costly than my personal account, but that is to be expected for business banking.
There are also several other personal banking options in Italy that offer low‑cost or zero‑cost accounts, especially if you are comfortable with online banking. CheBanca!, ING, Hello Bank, Widiba, and N26, Revolut, and Wise all offer modern apps, free withdrawals, and free domestic transfers. Comparison websites make it easy to check current offers and see how much you could save by switching.
My simple message is this: pay some attention to your bank account in Italy if you have not done so for some time. It is not difficult to change accounts anymore, and with even basic Italian you can manage the process without problems. You could be making significant savings simply by switching to a more modern and cost‑effective bank. If someone is paying hundreds of euros a year in unnecessary fees, then it is certainly worth reviewing.
Take a moment to look at your recent bank statements and see what charges you are paying. Then compare them with what is available today. You may be surprised at how much you could save.
By Gareth Horsfall
This article is published on: 23rd April 2026
Italy does not have a system of taxation with a tax free allowance system and therefore tax is paid from the very first Euro.
However, Italy does allow a number of tax deductible and detractable expenditures from taxable income.
Firstly, what is the difference between a tax deduction and a detractable expense?
Both are valuable, and knowing the difference helps you understand how the savings work.
Without a doubt the most common category is healthcare expenses (detractable at 19%)
What you can claim is as follows:
There is a ‘franchigia’ (excess) related to these expenses, which means that it is only the accumulated expenses over €129.11 which are considered eligible.
If your total health expenses are below this amount then you cannot detract from tax. (Equally, you cannot claim this credit if the expense is covered by insurance.
To give an example……if my total expenses are €800 during the year, then the calculation is €800 – €129,11 = €670,89, on which I apply the 19% tax credit = €127,47 tax credit.
It may not seem much but a few years ago I had to have some urgent dental care which cost €10,000. It was not covered by insurance and so I had to pay myself. That year I had a tax credit of €1875,46. Every little helps!
When you go to the farmacia make sure you present your codice fiscale to the pharmacist and they will normally tell you whether it is an item that qualifies or not.
** FARMACIA AND HEALTH EXPENSES ARE NOW REGISTERED AUTOMATICALLY ON THE AGENZIA DELLE ENETRATE (TAX AUTHORITY) WEBSITE. YOU CAN ACCESS THE WEBSITE AND CHECK THEM YOURSELF, HOWEVER THERE ARE OCCASIONS WHEN THEY DON’T APPEAR SO MAKE SURE YOU KEEP YOUR RECEIPTS AND GIVE THEM TO YOUR COMMERCIALISTA / FISCALISTA (ACCOUNTANT) WHEN YOU FILE YOUR RETURNS **
This is by far and away the next biggest category for gaining tax credits.
The key incentives for home improvements are as follows: (at at 2026)
On your ‘Prima Casa’ (first home) you can claim a 50% tax credit up to a maximum spend of €96000, spread over 10 years.(at time of writing)
On your second home or property (other than Prima Casa) it is a 36% on a maxi spend of €96000 spread over 10 years.
(excluding boilers which burn fossil fuels.)
This is a category which people often fail to utilise because there are some questions over whether foreign insurance premiums paid can be deducted in an Italian tax return.
For policies that qualify as Life insurance, accident (both max €530) and long-term care insurance (LTC) – (€1291)
They must qualify (even if issued outside Italy) under the following conditions:
I enter my life policies issued in the UK years ago, before Brexit, and which cover me throughout the EU and were issued whilst the UK was still in the EU. I principally have life insurance contracts with Legal and General and provide cover across the EU. The other alternative is to take out Italian equivalent policies especially for things like health insurance. It’s worth getting a quote from one of the bigger insurance providers such as Generali (or Genertel, their online offering) Allianz, Zurich, Groupama, Unipol Sai, Banca Intesa, Reale etc
Other categories include:
Donations (19-30%)
donations to recognised NGO’s, religious institutions or universities.
Mortgage interest (19%)
You can deduct interest on mortgages for your first home (prima casa) up to a cap of €4,000 per year.
Education expenses (19%)
Max annual deduction for private schools may vary by level and region, with a cap around €800 per child.
If you rent your main home, you may claim a tax credit based on your income and contract type.
For example: Ordinary rental contracts (contratto 4+4), Student housing and transfers for work (if you’ve moved for employment reasons)
The credit varies depending on income, age, and contract type (e.g., up to €495.80 or more).
Family related deductions and credits
Dependent children and other family members, alimony and maintenance payments (deductible), Nursery/kindergarten costs (detraction up to €632 per child)
Disabled persons (LEGGE 104/1992 BENEFITS)
Special deductions and detractions for people with disabilities or their caregivers, including: 19% for adapted vehicles (with limits), full deduction of medical devices, assistance costs, etc.
Sport and Youth activities (19%)
Up to €210 per child under 18 for gym, swimming, dance classes, etc. Applies to recognized sports facilities and clubs.
By Gareth Horsfall
This article is published on: 21st April 2026
I admit it. I have been confused for years about the rendita catastale. I have never been entirely sure about its role in the Italian economy or how it benefits the individual or the system as a whole. Until now. A recent deep dive into some economic analysis finally made the penny drop.
IMU – (Imposta Municipale Propria) – The tax on second + properties and houses, which are considered luxury properties (Class A/1, A/8, A/9)
Imposta di registro, Ipotecaria e Catastale – the taxes when buying and selling property (not market value!)
Imposta di successione e donazione – the value of property is calculated using the rendita catastale for the purposes of inheritance tax. https://spectrum-ifa.com/how-can-i-save-on-inheritance-tax-in-italy
The rendita catastale represents the amount of “theoretical rent” that a householder pays to him or herself as a measure of economic consumption. It is an imputed figure — a notional income — that reflects the benefit you receive simply by living in a property you own. In other words, if a householder owns their home outright, with no mortgage or debt, then that person is considered both a consumer and an investor of the invisible rent money they would have received had they been renting out a similar property. This money is assumed to be spent, reinvested, or otherwise circulated back into the economy.
Economists consider this a growing financial benefit that property owners enjoy from not having to pay rent. It is a silent contribution to economic activity, even though no cash actually changes hands. And in a country like Italy, where home ownership is culturally and economically significant, this imputed value plays a surprisingly large role.
During the financial crisis 2008/9, the Italian economy shrank dramatically. GDP fell, unemployment rose, and many sectors contracted sharply. Yet property, proportionately, made up more of the gross domestic product. The weighting of property in Italian GDP increased despite falling house prices and fewer transactions. That gives you an idea of how severe the declines were in other parts of the economy. Even when the market was weak, the imputed value of housing — the rendita catastale — continued to represent a stable and substantial component of national wealth.
This helps explain why successive governments treat property taxation so delicately. When the financial benefit from housing takes up a larger proportion of a property owner’s economic position, it becomes politically sensitive. It is no coincidence that governments have repeatedly adjusted or abolished taxes on the prima casa, recognising that Italian homeowners’ spending habits are more important to the domestic economy than the behaviour of foreign buyers. Italy’s economic engine is fuelled by its own residents, and the majority of them live in homes they own.
The Italian economy relies heavily on home ownership. Simply by residing in debt‑free housing, paying no rent, living in family homes, or paying below‑market rents, Italians contribute a significant share to national GDP through this imputed rental value. In a country where more than seventy percent of the population live in owned residences, this contribution is not only substantial but essential. It has grown over time, rising as a share of GDP, and continues to act as a stabilising force even when other sectors fluctuate.
Understanding the rendita catastale also helps explain why property taxation in Italy often feels disconnected from market reality. The cadastral values used for tax purposes are based on an old system that does not reflect current market prices. Yet these values continue to underpin calculations for IMU, taxes on buying and selling properties, inheritance tax, and other assessments. The system persists because it provides predictable revenue for the state and a predictable burden for homeowners, even if it bears little resemblance to actual property values.
There have been discussions for years about reforming the cadastral system, modernising valuations, and aligning them more closely with market prices. But such reforms would have enormous political and economic consequences. Updating cadastral values would instantly increase the taxable base for millions of households, and no government has been willing to take that risk. So the rendita catastale remains, outdated but deeply embedded, shaping everything from tax bills to inheritance planning.
What becomes clear is that the rendita catastale is not just a quirky Italian administrative concept. It is a structural pillar of the economy, a silent indicator of wealth, and a key reason why property taxation is handled with such caution. It reflects the reality that Italians’ relationship with property is not merely financial but cultural, generational, and deeply tied to economic stability.
And now that you finally understand it, you can see why it matters — not just to economists, but to anyone living, buying, inheriting, or planning their financial future in Italy, including us.
By Gareth Horsfall
This article is published on: 21st April 2026
You may not be aware, but from an inheritance tax point of view, Italy is actually considered more like a fiscal paradise. After you have picked yourself up off the floor because I just called Italy a “fiscal paradise”, you might want to read on. If your estate, or part of it, is likely to be subject to Italian inheritance tax on your death, then the current rules may interest you.
Italian inheritance tax law dates back to the Napoleonic period.
It requires parents, on death, to leave a major proportion of their wealth to their children instead of just their spouse. This system of forced heirship still exists today and continues to shape how estates are distributed in Italy.
If the estate is passed to your spouse or relatives in a direct line, such as children, they are required to pay 4% on the value of the inheritance that exceeds one million euro per beneficiary. Brothers and sisters must pay 6% with an allowance of one hundred thousand euro each. Other relatives must pay 6% or 8% depending on the degree of relationship, but without any allowance. Non‑relatives pay 8% with no allowance.
However, there is a term called ‘eredi legittimi’ meaning that only certain relatives have an absolute right to the share of your estate on your death. These are your children and, spouse. If you don’t leave any children then your parents and brothers and sisters have a legal right to a share in your estate and only in the event that there are none of the above, would your other relatives up to the 6th degree have a legal right to a percentage of your estate.
For foreigners (non- Italians) living in Italy at the time of death they have a right to nominate the law of their home country as a way to distribute the assets from your estate on death, instead of being forced to adopt the Italian forced succession rules. (If you are from the UK, this could create significant IHT planning opportunities). It mean you are taxable in your home country (depending on the IHT rules there) but simply means you may be able to distribute your assets according to a last will and testament, if that is your choice. One exception does apply, where you have spouse of children who are resident in Italy at the time of your death, and in this https://spectrum-ifa.com/rendita-catastale-in-italy/ case, they may be legally entitled to their fair share of your estate regardless of your will. If you are in any doubt it is always best to consult a legal professional to discuss the options.
Despite Italy having a large number of people who are subject to inheritance tax each year, the tax collection is relatively small. This is due to the high allowances and also the fact that succession for a property is based on the valore catastale, not the market value. The cadastral value is often significantly lower than the real value, which reduces the taxable amount.
There has been periodic political discussion about increasing inheritance tax in Italy, but as of 2026 no changes have been implemented. The current system remains one of the most generous in Europe, especially for spouses and children. However, this does not mean that planning is unnecessary. On the contrary, understanding how your assets are treated under Italian succession law can make a significant difference to what your heirs ultimately receive. The new UK Statutory Resident rules https://spectrum-ifa.com/new-uk-inheritance-tax-rules/ for inheritance tax mean that many more UK nationals living in Italy may be able to avoid UK and Italian IHT altogether with some clever planning.
As part of any inheritance tax or succession planning that you may undertake, you may want to look at ways in which you can hold assets in a more tax‑efficient manner. The polizza assicurativa — or life assurance bond — meets exactly that criteria. Any money that you hold in one of these tax‑efficient accounts is completely free from Italian inheritance tax and is kept outside of the estate when the value is calculated. This can be particularly useful for those who wish to leave assets to beneficiaries who are not in the direct line, or who wish to avoid the constraints of forced heirship within the limits permitted by law. It is also outside the Italian equivalent of probate (successione) and so will not get potentially tied up for any length of time in administration or legal affairs, potentially saving thousands in legal fees as well.
The not‑so‑good news is that if the majority of your estate is in your property, this cannot be placed inside the tax‑protective structure. However, any other invested or investable assets can be, generally from around €250,000 upwards. One of the great advantages is that there is no upper limit to contributions. You can protect a large part of your estate from Italian inheritance tax easily and with maximum flexibility to access the capital and any income from it during your lifetime.
By Gareth Horsfall
This article is published on: 21st April 2026
If you are buying a house in Italy and are intending on benefitting from the system of detractions and deductions for the costs of building and renovating your property, then here are 5 things which we learned in our home restoration.
